Plans for stronger regulation of the funding of political parties will help improve
the public image of politics, Home Secretary Jack Straw has told MPs.

Mr Straw said the government's proposals to introduce greater scrutiny of donations to individual parties would help boost confidence in the political process.

He was speaking in the debate on the second reading in the Commons of the Political Parties, Elections and Referendums Bill which would outlaw foreign donations to political parties.

The bill would also require parties to disclose the identities of their major benefactors and amounts they had donated.

An independent electoral commission would also be set up to register parties and oversee their donations and expenditure.

Jack Straw: Rules out state funding of parties

Mr Straw said a "greater transparency " was needed in party funding.

"The secrecy which has been hitherto permitted political parties in their funding and the scandals which such secrecy has given rise to in recent years have undoubtedly left a sour taste," he said.

"In contrast all political parties and indeed the reputation of our political system as a whole will benefit from the provisions of this bill."

The measures in the bill follow recommendations made by the Neill Committee on Standards in Public Life in 1998.

Mr Straw said the government agreed with the committee that parties should not be given state funding as was the case in several other countries.

He feared that democracy might be undermined if parties were dependent on government money rather than the donations of voters.

"Political parties should be the champions of the people ensuring that the state is the servant and not their master," he said

"An over-reliance on state funding could absorb parties into the fabric of the state thereby putting their own institutional needs and those of the state above the needs of those of that they are elected to represent."

'System has been abused'

The Liberal Democrats broadly welcomed the bill, but warned that it did no go far enough to restore public confidence.

The party's constitutional affairs spokesman Robert Maclennan said there was "a very serious public perception that our system of funding political parties has been open to abuse and has been abused".

This impression had led to "a switch-off and a withdrawal of public support" for the political process, he said.

Robert Maclennan: The bill does not go far enough

He said that many voters believed parties had abused the honours system to reward big donors with titles.

Mr Maclennan was also concerned the bill included no absolute limit on
political donations by individuals - which the Lib Dems believed should
be set at £50,000.

"So long as those very large sums of money are donated by powerful industrial
figures then the public will be extremely suspicious about what they're getting
in return.

"It's very hard to deny the probability that there is a major quid pro quo.

For the Tories, shadow Commons Leader Sir George Young said was it common ground between the parties that "politics should be cleaned up".

But he urged the government to think again about its refusal to give tax relief on small donations of up to £500 to political parties.

"It is perverse to criticise parties for over-dependence on large donors and then to reject the very recommendation that would reduce that over-dependence," he said.